A Revisionist History of TV Patent Pools

“Neither Congress nor a U.S. government agency has ever compelled patent holders to form a licensing pool defined by government-mandated royalties. In essence, this would be a grant of a compulsory license for what the licensee wants to pay. Such ex post regulation of prices runs contrary to the patent system’s goal of encouraging innovation and, quite frankly, to the American free market system. … Since World War I, we are unaware of any situation where the government has either regulated royalty rates or compelled pooling.”

Consider, however, the case of RCA, originally structured in 1921 as the patent pool for radio patents. After government proceedings in 1924 (FTC and “packaged licensing”) and 1930 (Department of Justice consent decree separating RCA from its owners), RCA entered into a consent decree in 1958 concerning color TV patents (for which RCA was then the key owner), described in Time magazine:

“In a sweeping civil consent decree in one of the biggest Eisenhower Administration Sherman Act suits to date, RCA agreed to 1) put some 100 color TV patents into a royalty-free pool, 2) make available to all comers on a royalty-free basis at least 12,000 other existing radio-TV patents, 3) license all new patents during ‘the next ten years at a “reasonable” royalty rate.”

Some interesting commentary on the context and consequences are described in “Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries”, a 2001 tome by Alfred D. Chandler Jr, often cited as the “dean of American business historians”:

“The 1958 consent decree [with RCA] was part of a drive by the Justice Department’s Antitrust division to open the new electronics-based industries to competition by making the patents of IBM, AT&T, and RCA available to all… [The consent decree] made licenses available to domestic companies without charge… Foreign buyers would continue to pay full freight. … RCA Labs, in order to maintain licensing income after the consent decree, began to concentrate on licensing to Europe’s Philips and Japan’s leading consumer electronics makers.”

References

“Republican Attorney General William Rogers’ decision to go after RCA with a criminal indictment was undoubtedly encouraged by RCA’s $10 million out-of-court settlement with Zenith, when it got a look at the facts Zenith had collected to support its charges of monopoly.”

“RCA Under Fire”, Time Magazine, March 3, 1958, http://www.time.com/time/magazine/article/0,9171,893902,00.html

“In March 1921, Westinghouse and AT&T joined GE to use GE’s newly formed Radio Corporation of America as a patent pool. One of RCA’s initial purposes was to hold and allocate radio-related patents” Chandler, p.15

“Owen Young [GE’s general counsel and vice president] believed that the growing number of legal battles over patents could only slow the continuing development of radio technologies. His solution was for RCA, which already held GE’s patents and those of the navy, to obtain those of GE’s competititors in exchange for obtaining shares of stock in RCA and having representatives on its board.” Chandler, p. 16